Marketing
Starbucks CEO, CFO predicting turnaround despite Q2 loss
Although she admitted that transactions did not meet expectations, CFO Cathy Smith said the company was on the right track with its "Back to Starbucks" strategy, focused on creating inviting stores, simplifying the menu and making service more efficient.
April 30, 2025 by Cherryh Cansler — Editor, FastCasual.com
Starbucks' Q2 earnings left much to be desired, as the chain reported Tuesday that US comparable store sales fell for the fifth consecutive quarter. Earnings per share were 41 cents, missing analyst predictions by 10 cents.
Although she admitted that transactions did not meet expectations, CFO Cathy Smith said the company was on the right track with its "Back to Starbucks" strategy, focused on creating inviting stores, simplifying the menu and making service more efficient.
"In the U. S., market share, brand sentiment and customer contacts regarding wait times are all improving," she said during the Tuesday investors call. "We saw stabilization in our non-Starbucks Rewards member traffic indicating our broad-based marketing campaign to reintroduce Starbucks to the world is resonating with our customers."
CEO Brian Niccol agreed, saying, "We are where we should be in our turnaround."
"My optimism has turned into confidence that our Back to Starbucks plan is the right strategy to turn the business around and to unlock opportunities ahead," he told investors. "Improving transaction comp in a tough consumer environment at our scale is a testament to the power of our brand and partners getting 'Back to Starbucks.' We are on track, and if anything, I see more opportunity than I imagined."
Transaction recovery in comparable stores was strongest in the morning daypart, a good sign, according to Smith, who said "there was improvement quarter-over-quarter as we have invested in staffing and deployment, demonstrating that delivering the customer experience to win the peaks pillar of our Back to Starbucks strategy is effective. Our ticket growth in the US for the quarter was 3%, reflecting annualization of prior year pricing and fewer discount-driven offers in the current year."
The bottom line — the chain is driving more durable growth by moving away from highly discounted offers, building the foundation of a healthier base business to grow from, Smith said.
Growth outside the U.S.
While the U.S. sales were disappointing, Smith said she was optimistic about Canada's and China's results
"Our Canadian market has benefited from food innovation that has resonated with customers, fueling 12.5% higher food sales, said Smith, who also pointed out that China's comparable store sales were flat for the quarter with positive transactions and expanding margins.
"Additionally, customer and partner engagement scores improved year over year," she said. "In our international segment, we're seeing faster improvement as evidenced by eight of the top 10 markets with flat or positive comps. Our international cafes are starting their "Back to Starbucks" plan from a more consistent brand experience. It's early, but it's encouraging to see positive signs. Q2 highlights included:
- Global comparable store sales declined 1%, driven by a 2% decline in comparable transactions, partially offset by a 1% increase in average ticket.
- North America comparable store sales declined 1%, driven by a 4% decline in comparable transactions, partially offset by a 3% increase in average ticket; U.S. comparable store sales declined 2%, driven by a 4% decline in comparable transactions, partially offset by a 3% increase in average ticket.
- International comparable store sales increased 2%, driven by a 3% increase in comparable transactions, partially offset by a 1% decline in average ticket; China comparable store sales were flat, driven by a 4% increase in comparable transactions, offset by a 4% decline in average ticket.
- The company opened 213 stores, ending the period with 40,789 stores: 53% company-operated and 47% licensed.
- At the end of Q2, stores in the U.S. and China comprised 61% of the company's global portfolio, with 17,122 and 7,758 stores in the U.S. and China, respectively.
- Consolidated net revenues increased 2% to $8.8 billion, or a 3% increase on a constant currency basis.
- GAAP earnings per share of $0.34 declined 50%.
- Non-GAAP earnings per share of $0.41 declined 40% or declined 38% on a constant currency basis.
About Cherryh Cansler
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